World Oil Prices Ripple Through State Capitols

For the second time in a year, state officials are experimenting with the few tools they have - such as taxes, price-fixing laws and alternative fuel incentives - to flail at $3-a-gallon gasoline prices.

Gas prices temporarily hit the $3 mark in September after hurricanes Katrina and Rita shut down oil rigs and refineries along the Gulf Coast. The current price jump, spawned by record $70-a-barrel crude, is prompting state lawmakers to launch a second wave of proposals to respond to prices at the pump.

California Attorney General Bill Lockyear (D) has been the most aggressive to pursue possible price-fixing, subpoenaing records from 21 oil companies to see whether they are gouging consumers. President Bush last month asked the 50 state attorneys general to join federal agencies in a nationwide investigation of oil pricing practices.

Wisconsin Gov. Jim Doyle (D) has launched an online petition urging Congress to reinstate the 1980s-era windfall profits tax, which collected roughly $80 billion from oil companies before it was abolished in 1988 — far less than the $320 billion forecast.

Two Midwestern states espied a marketing tool in high gas prices. Concerned about loss of tourism dollars, South Dakota is offering a $20 ethanol voucher to lure motorists from surrounding states, while tourists in Iowa can enter to win one of 23 gas cards worth $50 each.

Soaring fuel prices even led New Jersey Gov. Jon Corzine (D) to broach dropping the state law requiring full-service gasoline stations. Oregon is the only other state without self-service pumps. But a political uproar forced Corzine to withdraw the idea within days.

There is only limited talk so far of suspending state taxes on gasoline at the pump - fees that range from 7.5 cents a gallon in Georgia to 44.53 cents a gallon in New York — in part because dropping the tax would deplete revenues the states needs for roadwork. And so far, no states have followed the lead of Rhea County, Tenn., which shut down schools for two days to save on diesel fuel for buses.The Tennessee Board of Education this week ordered the school district to make up the lost days

Beyond conservation, states have little leverage over the cost of gasoline because it is a commodity traded on world markets, said Jeffrey Pillon, an energy market expert with the Michigan Public Service Commission. "The bottom line is, we've got to use less," he said.

But backlash over record profits announced by the nation's largest oil companies is fueling political outrage and spurring calls for action to contain fuel prices.

New Jersey Attorney General Zulima V. Farber (D) has pledgedthat her agency again will be watching to make sure gas stations across the state do not raise prices more than once a day. Farber recently announced settlements totaling $1.38 million of state lawsuits filed against four major gasoline suppliers last year.

It will be even harder to take legal action this time: All but four of the 27 states with laws prohibiting price gouging require an emergency declaration or significant market disruption for the law to take effect, and most states of emergency have lapsed since last hurricane season.

Arizona and Wisconsin are among the 23 states without penalties for price gouging, and their attorneys general are asking for both state and federal laws against profiteering.

Some politicians also are calling for higher taxes to penalize record oil company profits. California lawmakers have proposed an additional 2 percent state tax on some oil company profits.

Democratic governors across the country, seeking to highlight differences with Republicans on Capitol Hill and the White House, are calling on Congress to roll back more than $10 billion in federal tax credits awarded energy companies last year.

Lowering or suspending gas taxes for consumers also is being mentioned during this campaign season. Maryland Lt. Gov. Michael Steele (R) , running for a U.S. Senate seat, called on President Bush to suspend the federal gas tax of 18 cents per gallon for 120 days.

Maryland Gov. Robert L. Ehrlich (R), up for re-election this year, has suggested that consumers would benefit if he temporarily trimmed the state's 23.5 cent tax on each gallon of gas, but acknowledged that his proposal could cut into transportation funds.

Democratic legislators in Texas, in the midst of a special session to hammer out a new school financing system, have filed a bill to give consumers a 90-day reprieve from that state's 20-cents-a-gallon gas tax on gas.

And Nevada state Rep. Bob Beers (R), who is running for governor, is calling for a special legislative session to permanently repeal the state's 23 cent tax on each gallon of gas.

Georgia Democrats are asking Gov. Sonny Perdue (R) to temporarily suspend the state's gas tax as he did after last year's hurricanes. Perdue also declared two statewide "snow days" for public schools immediately after the summertime hurricanes to save gasoline and stretch schools' transportation budgets.

West Virginia Gov. Joe Manchin (D) prevented an annual increase in his state's gas tax after the 2005 hurricanes.

While most responses to the current energy problem are considered short-term measures, some states are considering efforts to conserve gasoline and cut their energy costs over the long haul.

Missouri lawmakers are weighing a bill, backed by Gov. Matt Blunt (R), to require that gasoline in their state contain 10 percent ethanol, a fuel alcohol derived from plants. Legislators in Michigan also are considering lowering the state's fuel tax on blends of ethanol gasoline to encourage greater use of the alternative fuel.

Hawaii, Minnesota, Montana and Washington are the only states that require that some or all of the gasoline sold in the state be blended with ethanol.

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